Collapse of America’s Cup piers deal a blow to SF

San Francisco Mayor Ed Lee was set to tour crumbling piers with matchless views of the Bay Bridge last week to showcase how hosting the America’s Cup regatta would help revitalize the city’s aging waterfront.

Instead, the tour was hastily scrapped. Three hours later, the mayor was before a bank of cameras acknowledging that 13 acres of concrete and pilings known as Piers 30-32, which the city has tried unsuccessfully to develop for decades, would no longer be rehabilitated to serve as sailing team bases for the 2013 races.

While the regatta will go on, the shift probably cut hundreds of jobs from the city’s projections for hosting international sailing’s premier event. It also has triggered a reassessment over whether this signals the end of major waterfront development, a temporary setback or a turning point in how the city manages its bayfront as the Port of San Francisco grapples with $2.2 billion in repair work it can’t afford.

“We have a real problem,” said Gabriel Metcalf, executive director of the San Francisco Planning and Urban Research Association, a public-policy and smart-growth think tank. “We have billions of dollars of deferred maintenance on the port, and our only strategy is to hope for these unique, one-off projects like the Ferry Building or the Giants ballpark or the Exploratorium to come along and be willing to pay the cost. There are not very many of those. They are few and far between, and we just lost one of them.”

The surprise decision by race organizers led by billionaire Oracle co-founder Larry Ellison to dramatically reduce an investment in port property for the regatta was quickly portrayed by Ellison’s group and city officials as a prudent move to ensure the regatta’s success in a new setting, where it is projected to draw millions of spectators, in part because it will be readily visible from land rather than miles out at sea.

The controversial real estate component “was becoming a distraction to the whole race itself,” Lee said in a recent interview, and this put the focus back on the regatta.

By virtue of Ellison’s Oracle Racing team winning the last Cup in 2010, Ellison, through his team’s sponsor, San Francisco’s Golden Gate Yacht Club, decided the location of the next race.

A scaled-down deal

Details of a new deal with the city are expected this week, with the Board of Supervisors to take it up March 27. Those involved in the talks said the plan will be dramatically scaled back from one that several members of the Board of Supervisors demanded revisions to last month over concerns about the city’s bottom line. That deal could have seen the port reimbursing Ellison’s regatta group, the America’s Cup Event Authority, with $111 million worth of rent-free leases, land, development rights and other funding in exchange for repairing Piers 30-32 and other infrastructure work.

Under the new deal, the event authority is projected to spend about $18 million on port upgrades, including improving public access to the waterfront and helping to ready Piers 27 and 29 for use as the America’s Cup spectator village, said Stephen Barclay, the authority’s main negotiator. The talks center on how the city will reimburse that investment.

“We were spending a lot more money than we anticipated,” Barclay said of the previous deal. “It involved a whole lot of process to get our money back, and the (construction) time frames were unrealistically tight.”

Fewer benefits likely

In the process, the races’ economic benefits appear blunted.

A 2010 city-commissioned study by Beacon Economics and the Bay Area Council Economic Institute projected that hosting the Cup would generate about $1.4 billion in economic activity in San Francisco and almost 9,000 jobs. The report also assumed 15 teams would participate. There are currently only four, with a June 1 entry deadline. Infrastructure work accounted for $159 million of that economic output and 770 jobs.

A separate analysis that year by the Board of Supervisors’ budget analyst projected economic benefit from the races ranging from $947 million to $1.6 billion.

While some infrastructure work will continue, primarily on Piers 27 and 29, the cost of rehabbing Piers 30-32 for the races was $60 million. Millions more would have been needed to develop it.

More troubling for the port is the lost opportunity to get private investors to front the money to rehabilitate a 100-year-old pier where development plans have repeatedly foundered.

A troubled history

Scandinavian Center Inc.’s plan in 1990 for a cruise terminal, exhibition hall and other uses for Piers 30-32 failed due to a lack of financing.

Another proposal in 2000 for a terminal, offices and retail was abandoned in 2006 because of the cost of rehabbing the piers. Former 49ers owner Eddie DeBartolo then tried revising the project, but the port rejected his plan.

Shorenstein Properties LLC in 2008 considered an office development at Piers 30-32 to pay for building a cruise ship terminal at Pier 27. That plan also fell through.

“This is history repeating itself,” said Jasper Rubin, a former city planner and policy analyst who wrote the book “A Negotiated Landscape,” a detailed history of the city’s waterfront development. “It’s hard to see a way out of it for the port.”

Part of the challenge in developing piers, Rubin said, is that the state – and rightly so – requires port property to benefit the public, which typically prohibits building housing and offices. Exceptions can be made with corresponding public benefits, but the process is complicated, he said.

“I don’t know how realistic long-term development plans are for 30-32,” Rubin said.

The piers are so deteriorated that now they’re usable only as a parking lot that can’t even accommodate heavy trucks. The port estimates the piers will be condemned in 10 years and projects demolition costs at about $40 million.

Supervisor Mark Farrell, who expressed frustration that some viewed private investors as adversaries in the America’s Cup talks, has requested a hearing into how the port handles future development.

“The bottom line is we need to think about how we approach this or else we’re going to be staring at chain-link fences and rotting piers for generations to come,” Farrell said.

Funding shift weighed

One option, said former Board of Supervisors President Aaron Peskin, is to treat the port more like other city departments and give it a cut from taxes and fees.

That way “they’re not always going hand-to-mouth and reliant on cash infusions from private interests,” said Peskin, who sued to oppose the last deal.

The port’s budget currently comes from leasing out its property, even as many of its traditional maritime tenants have long shifted away.

While some have questioned whether the city’s fractious politics have made it impossible for major future waterfront deals with private investors, Lee said there are still options for Piers 30-32.

“Larry Ellison did say in the conversation, ‘It’s not off the table,’ ” Lee said. ” ‘If I win this race – and I intend to – we want to come back. And if nobody else has made a proposal by that time, we would like to see whether we can.’ ”